Interim Payments: the application of the criteria under CPR 25.7

12/12/2021

In two recent cases the Courts have considered the application of the criteria for making an order for an interim payment.

In Buttar Construction Ltd v Arshdeep [2021] EWCA Civ 1408, [2022] PIQR P3 the Court of Appeal dismissed an appeal against an order for an interim payment in a case where there were multiple Defendants, and all denied liability.

The Claimant was injured while he was working as a labourer on a building site when joists and a wall collapsed on top of him. The claim was brought against 4 Defendants including D2, his employer, who were independent contractors subcontracted by D4 (Buttar), who was the principal contractor on site. The Claimant applied for an interim payment against D2 and D4 only. Both defendants had public liability and employer’s liability policies, although their insurers were reserving their rights.

The judge at first instance ordered an interim payment of £300,000 to be made to be shared equally between D2 and D4. D4 appealed.

On the appeal the Court of Appeal considered the provisions of CPR 25.7 and, in particular, CPR 25.7 (1) (c) and (e), which provide:

(1)  The Court may only make an order for an interim payment where any of the following conditions are satisfied:

….

(c) it is satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial amount of money (other than costs) against the defendant from whom he is seeking an order for an interim payment whether or not that defendant is the only defendant or one of a number of defendants to the claim;

…

(e) in a claim in which there are two or more defendants and the order is sought against any one or more of those defendants, the following conditions are satisfied –

(i) the court is satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial amount of money (other than costs) against at least one of the defendants (but the court cannot determine which); and

(ii) all the defendants are either –

(a)   a defendant that is insured in respect of the claim

(b)  a defendant whose liability will be met by an insurer under section 151 of the Road Traffic Act 1988 or an insurer acting under the Motor Insurers Bureau Agreement or the Motor Insurers Bureau where it is acting itself; or

(c)   a defendant that is a public body.

D4 submitted that the judge should have first considered whether the requirements for an interim payment under r.25.7 (1)(c) were satisfied in respect of D2 alone, before going on to consider whether the conditions in r.25.7 (1)(e) were satisfied against both D4 and D2.

The Court of Appeal rejected that argument. The Clamant was entitled to apply under r.25.7 (1)(e) instead of r.25.7 (1)(c). Paragraph (c) applies where it is clear as to the identity of the party against whom judgment will be entered whereas paragraph (e) applies where this is not clear, as in the case of multiple defendants and the court cannot determine which defendants would ultimately be held liable to the Claimant.

The further argument by D4 that because liability would likely either be determined against D2 alone or both D2 and D4 did not bring it outside the requirements of paragraph (e) by meaning that the court could determine against which defendant the Claimant would obtain judgment. The requirements of r.25.7 (1)(e)(i) were satisfied where, as here, the court cannot determine whether the claimant would obtain judgment against: (a) D2 alone; or (b) D2 and D4.

It was held that the wording of r.25.7 (1)(e)(ii)(a), which requires that a defendant “is insured in respect of the claim” did not mean “indemnified” or “has the right to be indemnified”. Although the insurers of D4 were said to be reserving their rights, by definition, during a period of reservation of rights, the policy remains extant. Since cover had not been declined and the policies had not been avoided or repudiated, the defendants remained insured until their insurance has been brought to an end.

The Court of Appeal confirmed that although on a literal reading r.25.7 (1)(e) requires that all defendants to the claim and not just defendants from whom an interim payment is sought should satisfy one of the requirements of (e)(iii) that was not submitted to be the case further to Berry v Ashtead Plant Hire [2011] EWCA Civ 1304 and the pre-CPR rule.

The issue was raised by the D4 as to whether the judge should have exercised his discretion (the Court of Appeal stated that it was “undoubtedly correct” that there was discretion) to order an interim payment from D4 in light of the chance that the claim will fail, the Claimant was impecunious and D2 would likely not be indemnified. The Court of Appeal held that the judge took into account all material features when exercising his discretion and it was within the ambit available to him.

In another recent case, Stephen v Stephen [2021] 10 WLUK, the Claimant’s application for an interim payment was unsuccessful. In this case Cotter J. considered whether the Claimant was able to satisfy the requirements of CPR r.25.7(1)(c).

The Claimant’s claim arose from a road traffic accident, and it is necessary in considering r.25.7(1)(c) to address the circumstances of the accident, which are summarised as follows. At twilight, at around 9 pm on 13 August 2019, D had been driving a tractor along a lane. Attached to the rear of the tractor was a seeding machine, which was wider than the tractor. C and his wife were walking on the lane when they became aware of the approaching tractor. They attempted to get out of the way by stepping onto a verge adjacent to a hedge. The tractor passed, but the seeding machine struck them, causing injury.

C alleged that D had driven too fast, failed to heed the position of him and his wife on the verge and failed to stop or slow down. Liability was denied. D’s defence was that he had kept a proper lookout for pedestrians on the lane, it was twilight, the lights on the tractor were on, he had not seen them prior to the accident, that the probable reason was that they had moved on to the verge and were obscured by vegetation and the hedge, they were not illuminated by the light on the tractor and/or they were wearing dark clothing. He maintained that he was driving at a reasonable speed and was correctly positioned in the middle of the lane. He conceded that he had driven past them and that the seeding machine with its greater width had collided with C.

As had been held in HMRC v GKN [2012] EWCA Civ 57 (and endorsed in Buttar) the wording of CPR r.25.7(1)(c) means that a judge has to be satisfied that the claimant “would” in fact succeed and not merely that “it was likely” that he would succeed. In Stephen Cotter J. held that this made a critical difference to the outcome of the application.

In HMRC v GKN it has been held that the first thing a judge had to do was to put himself or herself in the hypothetical position of being the trial judge and then ask whether they were satisfied on the balance of probabilities that on the material before them the claimant would obtain judgment for a substantial amount of money from the defendant. The first interim payment hearing must not be a mini trial.

The judge putting himself in that hypothetical position had to be conscious that not all the evidence that might be adduced at trial was available (e.g. in this case accident reconstruction evidence) and that such evidence as was available had not been fully tested through the trial process. 

Given all the circumstances of the case, it could be said that it was likely that D would find it difficult to resist primary liability and that C would win, but that was not the test for entitlement to interim relief. The court was not satisfied that D’s arguments were sufficiently weak to get C where he needed to be. Applying the high hurdle that needed to be cleared, by a very narrow margin and after careful consideration the high hurdle had not been satisfied.

Observations

In any application which relies on specific provisions of the CPR it is necessary to consider the specific wording of the rules and work logically through them. In Buttar the conclusions drawn on the meaning of the criteria under r.25.7 are probably unsurprising. It is clear why the appellant would not be happy about the Court’s decision in the circumstances, but the interpretation on which the decision was based was consistent with the ordinary meaning of the words (save as clarified re insurance above). Ultimately, the order in Buttar was an exercise of discretion, which is of course very difficult to disturb on appeal.

The decision in Stephen serves as a useful reminder of the importance of the prescribed wording of r.25.7 (c), given the fine distinction that was made by Cotter J. in respect of the prospects of success. Again, ultimately it is an example of an exercise of discretion on the facts of the case. On any such application it is essential that the facts are analysed carefully, on the basis of the evidence that is before the Court at the interim stage. Where liability is denied, there is often scope for different judges to take different views and at the interim stage the scope for a range of opinion is legitimately greater.